Political Entrepreneurs

The Economic Engine of Political Change

Our former professor, Charles K. Rowley, passed away this weekend after a long and prolific career as a scholar and teacher.

Professor Rowley was a passionate teacher, as anyone who sat in his classroom will attest. He was also a deep scholar of public choice, and he worked tirelessly to shape the contours of the field, to advance those frontiers, and to stake claims to this work in the name of Virginia School scholars, particularly Jim Buchanan and Gordon Tullock.

Charles wrote scores of articles and books of his own across many areas, not least of which include constitutional and industrial political economy. He founded The Locke Institute in the early 1990s, through which he published dozens of scholarly books and edited The Shaftesbury Papers, yet another offspring of his tireless inventiveness as a scholar.

Over at Cafe Hayek, Don Boudreaux (Rowley’s colleague at GMU) points us to a brief passage from 1987 that illustrates Rowley’s feisty criticism of bad ideas and defense of good ones. In this case, Rowley’s target is Keynesian interventionism to promote full employment and price stability, which Buchanan and other Virginia scholars had shown would instead systematically lead to high unemployment, inflation, and ever rising deficits.

Newly graduating economists of post-Second World War vintage, knew no other macroeconomics that that of Keynes. Weaned on Samuelson’s Economics, they carried the Keynesian interventionist message out of the academy and into government, business, and, especially, the media. By 1960, such Keynesians constituted an influential ‘intelligentsia’ within the Democratic Party. They provided the intellectual justification for a Great Society programme of fiscal prodigality, which the US Congress was independently eager to broker. The experiment failed, and Lyndon Johnson decided not to seek a second term. Although the failure edged the Keynesian research programme towards a state of crisis, the budget deficits, which were its outward manifestation, had come for a longer stay.

The passage reflects our framework in Madmen: that ideas can shape institutions which in turn shape peoples incentives, for better or worse. As students of Rowley’s in the early 1990s, Wayne and I were shaped by him. We applaud and admire his example as a consummate entrepreneur of ideas.

Subscribe

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.189, ch.7)

The most successful entrepreneurs know what they do well, they know the market and the opportunities within it, and they choose those activities that create the most value. This is true in economic as well as political markets.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.178, ch.7)

[W]hen the right elements come together at the right time and place and overwhelm the status quo, it is because special people make it happen. We call them political entrepreneurs.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.176. ch.7)

While we started this book with Danny Biasone saving basketball, we end it with Norman Borlaug saving a billion lives. These stories are not that different. Both faced vested interests, which were reinforced by popular beliefs that things should be a certain way—that is, until a better idea came along.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.174, ch.6)

Because there was a general belief that homeownership was a good thing, politicians found the public with open arms.... Everybody was winning—except Alfred Marshall, whose supply and demand curves were difficult to see through the haze of excitement at the time, and except Friedrich Hayek, whose competition as a discovery procedure was befuddled... In short, once politicians started getting credit for homeownership rates, the housing market was doomed.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.166, ch.6)

Everyone responded rationally to the incentives before them. In short, the rules that guided homeownership changed over time, which in turn changed the incentives of these actors. And bad things happened.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.153, ch.6)

They understood the economics. The ideas had already won in ... the regulatory agency itself. All that remained to be overcome were some vested interests and a handful of madmen in authority.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.146, ch.6)

If the idea for auctions of spectrum use rights had been part of the public debate since at least 1959, why didn’t the relevant institutions change sooner? What interests stood in the way?

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.121, ch.5)

When an academic scribbler comes up with a new idea, it has to resonate well with widely shared beliefs, which in turn must overcome the vested interests at the table. Many forces come together to explain political change, even though it may seem like coincidence of time and place.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.120, ch.5)

It’s the rules of the political game that deserve our focus, not politicians’ personalities or party affiliations.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.119, ch.5)

In short, ideas are a type of higher-order capital in society. Like a society that is poor in capital and therefore produces little consumer value, a society that is poor in ideas and institutions will have bad incentives and therefore few of the desirable outcomes that people want.